Agricultural property relief (APR) and business property relief (BPR) draft legislation released

On Monday 21 July 2025, as part of ‘Legislation Day’, the Government published draft legislation under the Finance Bill 2025–26. This provided long-awaited detail on proposed changes to inheritance tax.

These updates follow the Autumn Budget 2024, where initial plans to reform agricultural property relief and business property relief were announced. Since then, we have been eagerly awaiting substantive details of the proposed changes.

In this reaction blog, we consider the forthcoming changes on agricultural property relief and business property relief applicable from April 2026. A separate publication is being released on pension tax changes.

What was announced in the legislation?

The new legislation introduces a baseline where only 50% relief from IHT will apply to agricultural and business property. However, individuals and trusts may still qualify for 100% relief, depending on their circumstances.

To support this, the government has outlined new rules explaining how the 100% relief will operate. These rules differ for individuals and trusts, with the £1m allowance for full relief set to increase annually with inflation from 2030.

The timelines for applying the relief also vary:

• Individuals: The allowance is assessed over a seven year period
• Trusts: The allowance is assessed over a 10 year period

These changes introduce a more structured framework for how agricultural and business property relief will apply from April 2026. As a result, estate planning will need to be more tailored and carefully managed—particularly for trusts and lifetime gifts.

In addition, two technical clarifications are worth noting:

1. Transitional trust rules: Trusts created before 30 October 2024 will only automatically qualify for the full £1m relief allowance if they already held assets that would have qualified for 100% agricultural property relief and business property relief at that time (regardless of ownership or occupation conditions). This transitional rule adds complexity and potential risk, especially for trusts that may not meet these criteria precisely
2. Valuation implications: If the value of gifted property falls after the transfer, the amount of the relief allowance used remains unchanged. While this may simplify administration, it could result in higher tax exposure if valuations are later challenged. This means greater care—and likely more professional input—will be needed when valuing lifetime gifts of qualifying property.

Read the full legislation here.

Key changes to agricultural property relief and business property relief

Broadly speaking the changes that were announced in respect of agricultural and business assets align with previous announcements as follows:

• From 6 April 2026 there will be a £1m allowance for 100% agricultural property relief and business property relief
• Any qualifying property over this amount will only receive 50% relief from inheritance tax. This allowance is also affected any gifts made on or after 30 October 2024
• Before this, there was no restriction on the amount of agricultural property relief and business property relief that an individual could claim

The allowance is also applicable to trusts with each trust created prior to 30 October having its own £1m allowance. However, caution is required as the applicability of relief will depend on the specific assets held in the trust pre 30 October 2024.

Trusts created after this date, or indeed some trusts pre existing, will share the £1m allowance (per settlor).

Impact on estate planning

Prior to these changes, many individuals have looked to retain their business interests in personal ownership until death on the basis that it can pass to their children free of inheritance tax. These changes mean there is a fundamental review required to any existing estate planning. Unless action is taken, for many people this will result in a significant increase in the potential inheritance tax on their death.

Challenges and uncertainty

To date, advising on options given these changes has been difficult as details of the application of these changes were not announced in the Budget. This has been frustrating as many people are keen to act now given the changes come into force so soon.

HMRC did previously release a consultation on these changes which provided some insight into how these changes would apply. However, it did not provide any certainty. Our previous comments on the consultation are linked here: Clarification on agricultural and business property relief changes | PKF Francis Clark

Next steps for planning

As noted above, we now have further details released yesterday with the publication of the draft 2025-26 Finance Bill. This provides us with more of an accurate framework which should enable us to help you consider your plans and circumstances in a more structured way.

Whilst we are not expecting any significant changes to the details released in the consultation, we are currently reviewing the draft legislation in detail. We will comment further in the implications of the changes in due course. If you are interested in finding out more, register for our in-depth webinars below.